Trump's Paid-Parental-Leave Plan Plays Catch-Up to State and Corporate Programs

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President Donald Trump's federal budget proposal, released May 23, calls for granting mothers and fathers up to six weeks of paid leave after the birth or adoption of a child, with the states playing a key role in funding and administering the program.

Some critics would prefer a more generous benefit, as many U.S. companies are expanding their paid-parental-leave programs and more states and localities are mandating that employers provide paid leave to new parents that's much more generous than the administration's proposal.

"During his campaign, the President pledged to provide paid family leave to help new parents," the Budget of the U.S. Government: Fiscal Year 2018 document states. "The Budget delivers on this promise with a fully paid-for proposal to provide six weeks of paid family leave to new mothers and fathers, including adoptive parents, so all families can afford to take time to recover from childbirth and bond with a new child without worrying about paying their bills."

Each state that does not currently provide six weeks of paid leave to new parents would be required to do so through the existing state-based unemployed insurance (UI) system, which is funded by unemployment taxes paid by employers.

"The [cost of the] proposal is fully offset by a package of sensible reforms to the UI system—including reforms to reduce improper payments, help unemployed workers find jobs more quickly, and encourage states to maintain reserves in their unemployment trust fund accounts," the budget plan states. "The administration looks forward to working with the Congress on legislation to make paid parental leave a reality for families across the nation."

The program is expected to cost about $25 billion over 10 years.

The administration would provide support to state governments to help them determine how to fund the program. States would have broad latitude to design and finance the program, and could opt out if they created a different paid-leave system that offers at least six weeks of paid leave to new mothers and fathers.

Currently,
California, Rhode Island and New Jersey offer new parents paid-leave benefits financed through temporary disability insurance programs.
New York and
Washington, D.C., have approved measures that take effect next year, which are paid for by employees (in New York) and employers (in D.C.).

A 2017
report by Pew Research Center found that Americans largely support paid parental leave, and most supporters say employers, rather than the federal or state government, should cover the costs.

Mixed Responses

Some family leave advocates think the plan is too meager. "The details matter tremendously," said Debra L. Ness, president of the National Partnership for Women & Families in Washington, D.C. "A paid-leave plan that continues the current state-by-state patchwork, only provides six weeks of leave when we have a clearly established 12-week national standard, guarantees leave only for new parents and is not funded responsibly would do more harm than good."

Tom Spiggle is founder of the Spiggle Law Firm in Washington, D.C., which focuses on protecting employee rights, commented that "This is a good start, particularly now that it is real family leave, not just maternity leave, but it leaves a lot to be desired. For starters, it provides just six weeks of paid leave, rather than the 12 weeks of unpaid leave in the Family and Medical Leave Act. The Trump administration also suggests that the program will be funded through state unemployment insurance programs, but many states may balk at something that appears to be an unfunded mandate."

Straining UI Reserves

Funding the parental leave program from building up UI reserves poses major challenges, said Bobbi Kloss, director of HR management services at Benefit Advisors Network (BAN), a consortium of health and welfare benefit brokers across the U.S.

"An annual study by the Department of Labor—the
Trust Fund Solvency Report for 2017—shows that during the 2007-09 recession and its aftermath, 36 states depleted their UI funds and were forced to take advances from the federal government to continue paying benefits," she noted. "At the beginning of 2017, 21 states have reached what is considered the minimal level of adequate solvency."

Those figures don't bode well for using the UI system to fund a billion-dollar benefit program, Kloss said.

"States that have enacted paid parental or family leave programs typically have looked to their disability programs rather than UI programs for structure," said Tami Simon, managing director of Conduent HR Service's Knowledge Resource Center. "As a practical matter, states relying on UI contributions to fund the new benefit may find their trust fund reserves insufficient if the benefit significantly impacts their UI program's experience and administration costs."

UI employer contribution rates are experience-rated, meaning that employers who draw more heavily on the fund—typically because they have high rates of terminating workers—face higher UI premiums/Federal Unemployment Tax Act (FUTA) payroll taxes. Employers that have more new parents taking leave "could also face higher premiums to cover the new baby bonding benefit," said Simon.

The administration proposal is playing catch-up not only to state initiatives, but to private-sector benefit trends.

In recent years, a growing number of large U.S. corporations have made generous family benefits part of their employee value proposition, branding themselves as family-friendly workplaces. For instance:

American Express expanded its paid-parental-leave policy to 20 weeks for all of its U.S.-based salaried employees—mothers
and fathers—beginning Jan. 1.

Furniture retailer Ikea US also began providing 16 weeks of paid parental leave for employees this year.

Tech company Etsy made its employees eligible for 26 weeks of fully paid leave when they become parents.

SHRM's
2017 Employee Benefits report, to be released in June, presents the latest SHRM survey findings on employers offering parental leave benefits over the past few years. Based on responses from 3,227 HR professionals polled in January/February, the findings revealed that:

30 percent of organizations provided paid maternity leave, which includes coverage by family or parental leave policies but excludes what is covered by short-term disability or state law. This offering has increased from 26 percent in 2016.

According to SHRM's
2016 Paid Leave in the Workplacebenchmarking report, last year, on average, organizations that offered paid leave for a new child provided 41 days for maternity leave, 22 days for paternity leave, 31 days for adoption leave and 36 days for surrogacy leave.

Depending on how the administration's newly proposed parental-leave program unfolds, "employers that already offer paid parental or other leave may be able to coordinate benefits and offsets with other state and local benefits, as well as their own programs," said Simon. "Certainly, that would ease the potential burden of a new employee benefit."

Decrease in Fully Paid Maternity Leave Noted

Another perspective of parental leave is provided by the latest National Study of Employers conducted by the nonprofit Families and Work Institute last year.

Over the past 11 years, this survey found, the number of organizations offering at least some replacement pay for women on maternity leave has increased 12 percentage points, from 46 percent to 58 percent. But among employers offering any replacement pay, the percentage offering full pay declined from 17 percent in 2005 to 10 percent in 2016.

Of all employers with 50 or more employees, only 6 percent offer full pay for those taking maternity leave, the study found.

The study did find that between 2012 and 2016 there was a small increase in the proportion of employers allowing at least some employees to return to work gradually after the birth of a child or adoption and to have special consideration after a career break for personal/family responsibilities.

Of employers providing (at least some) pay to women during maternity leave, most (78 percent) fund this pay through a general temporary disability insurance (TDI) plan, which typically provides partial wage replacement—often only half or two-thirds of the mother's pay—during the period of maternity-related disability. By size, 79 percent of small employers versus 73 percent of large employers offer TDI coverage.

The survey of 920 for-profit and nonprofit employers with 50 or more employees was conducted from Sept. 22, 2015 to Feb. 2, 2016.

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Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.